HELENA — Leasing state coal in the Otter Creek Valley could create a multimillion-dollar windfall for the state treasury — but it won’t necessarily increase funding for public schools, as some have suggested.
The lease also could lead to development of a coal mine, which would generate plenty of royalty and tax revenue for the state.
But the idea that this extra money will dramatically increase school funding statewide is pure speculation, said the head of the state teachers union.
“There is no guarantee that a single penny generated by Otter Creek will actually add to the funding of public schools,” said Eric Feaver, president of MEA-MFT, which represents teachers and other workers. “It’s not going to generate new state funding unless the Legislature decides it.”
Feaver is correct, even though some revenue from the lease and mine development is earmarked for school funding.
Here’s how the funding streams work on leased state minerals and mine development:
• The company that leases the Otter Creek coal would pay a “bonus bid” into a fund that goes directly to public schools next year, probably at least $57 million. However, that amount would be offset by a reduction in money budgeted for schools from the state’s general fund.
The end result is a $57 million windfall for the state’s general fund. Schools get the same amount of state money that the 2009 Legislature authorized.
• If a mine is developed — at least five to seven years in the future — the mine would pay royalties on the state-owned coal at Otter Creek. This revenue would go into what’s called the Common Schools Trust, which earns interest that is earmarked for schools statewide.
This year, the trust is expected to generate about $21 million of interest, or 2.5 percent of total state funding for schools.
Royalties from a mine at Otter Creek would boost the trust and its interest payments. However, the Legislature still decides the total amount of state funding for schools.
• A mine at Otter Creek would create millions of dollars in new property, coal severance and state income tax revenue. Powder River County, where the mine is located, would directly benefit from the property taxes, as would its schools.
However, any benefit to schools statewide again would depend on the Legislature, which sets overall school funding.
The Montana Rural Education Association, which represents smaller schools in Montana, supports leasing the Otter Creek coal. MREA’s executive director, Dave Puyear, last week said the Legislature and Gov. Brian Schweitzer should commit to using Otter Creek state land revenue for increasing school funding beyond its current amount.